Three hurdles hold back Latino business owners’ economic growth: credit score problems, limited funding sources and a business knowledge gap.
By Nicole Acevedo
Although one in four new businesses are Latino-owned and contribute more than $700 billion in sales to the U.S. economy every year, a new study has found that the businesses face significant barriers that keep them from increasing their revenues and building up wealth.
According to a report titled Latino-Owned Businesses: Shining a Light on National Trends, three main hurdles hold back Latino business owners’ economic growth: credit score problems, limited funding sources and a business knowledge gap.
“Digging into and understanding the causes of these issues and identifying possible paths forward is not only an imperative but an opportunity,” said Jack Gutt, executive vice president of communications and outreach at the Federal Reserve Bank of New York.
Nearly half of Latino-owned businesses were started during the past six years and many have relied on personal savings or seed funding from friends and family to start off. When seeking other sources of funding to finance their business growth, many owners either avoid taking on debt or are unable to meet the requirements to get a business loan.
In order to overcome the financial barriers, Latino business owners disproportionately rely on their credit cards and other financial methods to increase cash flow, including some that come with high interest rates but require less collateral.